What is Dropshipping? The Best Business Model of 2025

Have you heard of dropshipping but don't know how it works?

Did you know that 84% of e-commerce merchants say finding a dropshipping supplier for their e-commerce website is the biggest barrier to starting a dropshipping business?

All that means that finding a dropshipping supplier for your dropshipping business idea is not easy.

Therefore, let's learn about what dropshipping is and learn more about the dropshipping model and the top best suppliers so that you can understand this online business more clearly!

What is Dropshipping?

Dropshipping is an e-commerce business model in which the retailer does not need to keep the goods in stock, but instead, they will partner with suppliers or manufacturers to deliver the goods directly to the customer. This means that when a customer buys a product from your online store, the order will be shipped directly to the supplier or manufacturer, and they will do the packaging and delivery to the customer.

The Dropshipping model is simply understood: You are a seller, you post for sale the supplier's products at arbitrary prices and market the products. When a customer makes a purchase, you pay the seller the supplier's list price. The supplier records your customer information and passes it on to the customer. You just need to track the order and get the COD money.

The dropshipping model offers a lot of benefits, especially for beginners who want to start a business without much capital or experience in warehouse management. With dropshipping, you don't need to worry about warehousing, storing goods, or shipping, all of this work is done by the supplier. This helps you focus on other aspects of your business such as marketing, sales, and customer care.

How Dropshipping Works

Dropshipping is a unique business model where you can operate an online store without having to worry about storing goods or shipping products. Instead, all you need to do is connect between customers and suppliers. Specifically, this process is carried out through the following steps:

Seller signs agreement with dropshipping supplier

First, to start a business, sellers (aka retailers) need to find a reliable dropshipping supplier. This could be a well-known manufacturer, distributor, or dropshipping platform like AliExpress, Oberlo, or Spocket. The seller signs a cooperation agreement, which ensures that the supplier will be responsible for handling the product, packaging, and shipping the goods to the customer.

At this time, you – the seller – do not need to spend money to buy goods in advance or rent a warehouse. All you need to do is prepare an online store and search for customers.

Customers order online

Once your online store is up and running, customers will start visiting and choosing to buy products. They may find products through the marketing campaigns you run, like ads on Facebook, Instagram, Google Ads, or even from SEO blog posts you've created.

After choosing your favorite product, customers place an order on your website, enter personal information such as delivery address, and pay for the product. This is the beginning of a complete transaction.

The seller receives the order

When a customer completes an order, their information is sent directly to your management system. Here, you will receive details about the order, including product information, selling price, and customer shipping address. This is a critical time, when you – the seller – act as an intermediary between customers and suppliers.

But remember, customers only see you as the "store owner," not that the supplier is the one who does most of the work behind the scenes.

The customer receives an order confirmation

As soon as the order is received, you will send a confirmation email or message to the customer. This notification is not only a confirmation that the order has been recorded, but also creates trust, helping customers feel reassured that they are working with a professional store.

Note, these confirmation notifications are often automated through the sales system, helping you save time and enhance the user experience.

Seller transfers orders to dropshipping suppliers

After confirming the order, the next step is that you transfer all the order information to the dropshipping supplier. This is a simple but important step, because it determines that the product will be delivered on time and accurately to the customer.

Through integrated platforms (like Oberlo or Spocket), the order transfer process can be automated. You only need a few taps and the information will be immediately transferred to the supplier, including the product name, quantity, and shipping address.

Dropshipping supplier handles and ships orders

After receiving the information from you, the supplier will start processing the order. They will take the product from the warehouse, pack it carefully, and label it with shipping. In many cases, the product will be shipped with your logo or brand information, which helps to create professionalism and increase trust with customers.

This shipping process is entirely done by the supplier. You don't need to worry about packing, shipping, or working with shipping companies.

The customer receives the product

In the end, the product is delivered to the customer according to the information they have provided. This is the closing step of the transaction, where the customer receives your product and you, as the seller, receive a profit from the difference between the selling price to the customer and the price imported from the supplier.

If the product is delivered on time and meets the expected quality, customers will feel satisfied and can continue to support you in the future. At the same time, this good experience also helps build your store's reputation and trust.

Pros and Cons of Dropshipping Model Business

After understanding the definition and operation process of dropshipping, we will go deeper to analyze theadvantageandshortcomingof this retail business model. While dropshipping offers many benefits for business people, it also comes with some challenges that you need to be aware of.

Advantages of Dropshipping

The dropshipping model possesses several outstanding advantages, especially for those who are just starting an online business:

Easy business organization

Dropshipping has a simple operating process, encapsulated in only 3 main steps:

• Find Suppliers: Identify and partner with reputable suppliers or dropshipping platforms.
• Build a sales funnel: Create an online store through platforms like Shopify, WooCommerce, or Lazada.
• Perform sales work: Conduct advertising, marketing, and order processing.
• Since you don't need to worry about managing goods or shipping, you just need to focus on marketing and growing your sales channel.

Low cost of organizing sales

One of the biggest benefits of dropshipping is that you don't need to pay for the costs associated with storing, managing, or shipping goods. Tasks such as inventory control, packaging, and delivery are all taken care of by the supplier. The main expenses you need to pay include:

• The cost of building a website (or the cost of maintaining a booth on e-commerce platforms).
• Marketing costs to promote the product.
• This significantly reduces the financial burden when compared to traditional business models.

Low investment costs

Dropshipping allows you to start a business without investing too much capital. You don't have to order in bulk or store products, but only pay for the goods when you have an order from a customer. Therefore, this is a suitable model for those who want to start an online business but have limited capital.

Low risk

Since you don't need to buy the product in advance, you won't run the risk of unsold inventory. If the product does not bring the desired business performance, you can easily change the product portfolio without worrying about capital losses due to backlogs.

Cross-border sales

With dropshipping, you can sell to anywhere in the world without being limited by geographical location. Your store works online, without the need for an office, warehouse, or large staff. This provides a high degree of flexibility for business people.

Sell any product you want

You can easily research and choose to sell any product you like, from fashion, accessories, tech, to niche products such as educational toys or eco-friendly products. The special thing is that you can sell many types of products at the same time, helping to meet the diverse needs of customers.

Scale your business easily

In traditional business models, scaling up often means increasing warehouse management costs, hiring more personnel, and processing time. However, with dropshipping, you can easily expand by:

• Sell on many different platforms (websites, e-commerce platforms, social networks).
• Increase the number of products you offer without worrying about storage space or handling costs.
• Focus on marketing and attract more customers without the pressure of logistics.

Disadvantages of the Dropshipping Model

Despite possessing many outstanding advantages, dropshipping still has some notable limitations:

Lack of connectivity and data synchronization

Dropshipping orders require a strong connection between the retail platform and the wholesale platform. In Vietnam, wholesale e-commerce platforms such as Thitruongsi, Chosionline,... currently does not fully meet the technology and techniques to synchronize data with retail e-commerce platforms such as Shopee, Lazada or Tiki. This creates difficulties in managing and automating the order processing process.

High logistics costs

International shipping costs are a big problem in dropshipping, especially when goods are imported from China or other countries. In Vietnam, the cost of delivering an order under 1kg from China usually ranges from 50,000 to 60,000 VND. This does not include the costs of order processing, packaging, and sorting. This causes product prices to rise, affecting the competitiveness of sellers.

Risks from COD payment behavior

In Vietnam, payment on delivery (COD) accounts for 75% of online transactions (according to Google and Temasek). However, COD comes with high risks, including:

• High order cancellation rate: Many customers refuse to receive goods after placing an order.
• Low liquidity: Sellers have to wait 2-4 days for the carrier to reconcile and pay for the goods, affecting business cash flow.

Supplier Dependent

In the dropshipping model, you depend entirely on the supplier in terms of product quality, delivery time, and after-sales service. If the supplier is unreliable or delivers late, you will face customer dissatisfaction and risk losing credibility.

Low Returns

Since you don't buy in bulk, the cost of the product is usually higher than that of traditional retailers. This results in low profit margins, especially when you have to compete on price with other competitors in the market.

Who is Dropshipping suitable for?

Business modeldropshippingis considered to be flexible, accessible, and does not require large capital, so it is suitable for many different groups of people. Depending on your free time and financial capacity, you can consider dropshipping as a jobFull-timeor just aPart-time occupationto earn extra income. Here are the 3 main target groups that fit this model:

Office people

Office workers usually have a free time fund of 2-3 hours a day after work. This is the ideal time to start an online business with a dropshipping model. You don't need to spend the entire day managing your products, as most of the steps like order processing and shipping are taken care of by the supplier. This helps office workers make the most of their idle time to earn extra income without affecting their main job.

Benefit:

• Increase personal income without leaving your current job.
• The business model is simple, does not take much time to manage.
• Help office workers learn more skills in business, marketing and personal branding.

Challenge:

• It is necessary to know how to manage time effectively to balance the main job and business.
• It requires patience and a clear marketing strategy to attract customers.

Student

Students are one of the most ideal groups for the dropshipping model, because they have a lot of free time but not much capital to start a business. Dropshipping makes it easy for students to start a business without having to make a large initial investment, and it also provides the opportunity to learn practical business skills.

Benefit:

• Low investment: Students don't need to spend money to buy inventory, just focus on promoting products and processing orders.
• Learn business skills: This is an opportunity for students to learn how to research the market, build a marketing strategy, and develop communication skills with customers.
• Flexible time: With flexible study schedules, students can manage their business without compromising their studies.

Challenge:

• Lack of experience in customer management and online store operation.
• It can be difficult to balance time between study and business.

Online Business Beginners

For those who are new to the online business, dropshipping is the perfect model to get started. It helps you learn and practice the basic steps in business without having to take huge financial risks. You can focus on learning how to analyze the market, choose products, find reputable suppliers, and build an effective promotion strategy.

Benefit:

• Learn from reality: Dropshipping brings the most basic knowledge about business, from market analysis, finding potential products, to how to manage orders and handle customer feedback.
• No need for large capital: Newbies don't need to worry about the cost of importing or warehousing, you only pay the supplier when there is an order from the customer.
• Easy market testing: You can easily change your product portfolio and test different marketing strategies without being tied down by inventory.

Challenge:

• It depends a lot on the supplier, so it is necessary to choose a reputable partner to avoid risks of product quality or delayed delivery.
• Great competition, especially with popular products, requires you to have a unique marketing strategy to attract customers

How to Do Dropshipping Business

BusinessDropshippingIt's not just about selecting products and sales, but also requiring a specific plan to ensure efficiency and long-term development. Here are the detailed steps to get this business model up and running successfully:

Market Research

Market research is the first and most important step in the Dropshipping business. This helps you understand customer needs, emerging trends, and how to compete in the market.

• Market Survey: Find out which products are popular and have the potential to sell well. Use market analysis tools such as Google Trends, Amazon Best Sellers, eBay Watch Count to identify hot products. Identify the target customer (age, gender, interests, needs, income, etc.).
• Competitor Analysis: Identify the main competitors in the same field. Learn how they market their products, pricing, and customer care. Take note of the pros and cons of their strategy to learn and improve your strategy.

Identify the types of products you sell

After researching the market, the next step is to choose the right product to sell. This is an important factor that determines the success of a Dropshipping store.

• Product Selection: Focus on products with high demand and little competition. Choose unique, hard-to-find, or highly functional products to attract customers. Consider popular categories such as: fashion, accessories, household appliances, food, cosmetics, technology.
• Define a sales strategy: You can choose a specific niche market to focus on or sell a variety of products to increase your ability to reach more customers. Deciding on a retail or wholesale strategy depends on the business goals.

Contact Suppliers

Once you've identified the type of products you want to sell, the next step is to find and partner with reputable suppliers.

• How to find a supplier:Use popular Dropshipping platforms such as AliExpress, Oberlo, Spocket, SaleHoo.Refer to wholesale e-commerce platforms in Vietnam such as Thitruongsi.com, Chosionline.vn.
• Deal Setup: Negotiate specific terms on pricing, shipping times, return policies, and discounts. Check the product quality before officially selling.
• Note: Choose a supplier with a history of on-time delivery and guaranteed product quality. Make sure the supplier can provide detailed information about the product so that you can easily list it for sale.

Create a professional sales website

A website is the main platform for a Dropshipping business. This is where customers search for products, place orders, and contact you.

• Build a website: Use easy-to-use platforms like Shopify, WooCommerce (WordPress), or Wix to design your store. Invest in a professional, easy-to-use, user-friendly (UI/UX) interface. Integrate popular payment methods such as credit cards, PayPal, or wire transfers.
• Website Personalization: Create your own logo and brand identity. Add important pages like About, Shipping Policy, Return Policy, Contact.
• Optimize customer experience: Ensure that the website has a fast loading speed, is easy to find products, and has no errors during the ordering process.

Run your business from anywhere

One of the great advantages of dropshipping is that you can run your store from anywhere with a laptop and an Internet connection.

• Expand your reach: In addition to your website, take advantage of social media platforms such as Facebook, Instagram, and TikTok to reach more customers. Join online forums and communities such as Webtretho, Tinhte, Voz to promote products.
• Multi-channel sales integration: Link your store to major e-commerce platforms such as Shopee, Lazada, Tiki to reach more potential customers.

Set a good price

Product pricing is an important factor that helps you build your brand and attract customers.

• Pricing strategy: Ensure that the price is competitive enough but still profitable. Refer to prices from competitors and suppliers to come up with a reasonable price. Consider adding discounts and promotions to increase attractiveness.
• Price note: Don't overprice, as customers will compare it to other stores. However, too low a price can also raise doubts about the quality of the product.

Marketing for e-commerce stores

Marketing plays an important role in generating sales for a Dropshipping store. An effective marketing plan will help you reach more customers and increase profits.

• Effective marketing methods: Run ads: Invest in advertising campaigns on Facebook, Google Ads, TikTok Ads to reach your target audience. SEO (Search Engine Optimization): Optimizing websites and content to increase search rankings on Google, thereby attracting organic traffic. Email Marketing: Send promotional emails, discounts to a list of potential customers. Promote on social media: Increase engagement on Facebook, Instagram, and TikTok by creating engaging content that regularly updates new products.
• Improve customer experience: Provide clear contact information (phone number, email, address). Respond quickly to customer support requests and feedback.

Top Best Dropshipping Suppliers

Spocket

Spocketoffers a well-curated network of high-quality suppliers, mainly from the US and Europe, ensuring fast delivery and premium products of various categories. The platform is known for its seamless integration with platforms like Wix, making it an ideal choice for the automated dropshipping model.

Advantage:

• Spocket guarantees fast delivery from local suppliers, with high-quality products and branded invoice options.
• The user-friendly interface makes it easy to manage inventory and process orders.

Shortcoming:

• Some premium providers are only available on the more advanced plans.

Price:

• Free trial for 14 days; Paid plans start at $39.99/month.

SaleHoo

SaleHoo, based in New Zealand, was founded in 2005 and has served more than137,000 traderssince then. This is a search directory consisting of more than8,000 suppliersand provide access to more2.5 million different types of products, serving many types of businesses.

Advantage:

• Finding Reputable Suppliers: It is difficult to find reputable dropshipping suppliers that offer products from well-known brands. SaleHoo checks and verifies all suppliers, ensuring that the products offered are legitimate and genuine.
• Excellent Customer Service: SaleHoo offers dedicated, fast customer support.
• Extensive Resource Hub: SaleHoo has a powerful resource hub with a variety of helpful tools and guides for beginners in the dropshipping business.

Shortcoming:

• Not an integrated solution: SaleHoo is just a directory, not a technology integration platform for your store. You can't sync products directly from a vendor in the database.
• Needs regular updates: While there are thousands of pre-verified suppliers, SaleHoo's database needs to be refreshed and new suppliers added to keep up with the changing market.

Price:

• Starting at $67 per year.

Worldwide Brands

Worldwide Brands is a United States-based company, founded in 1999 by Chris Malta, a successful eBay seller. With over 20 years of experience, Worldwide Brands is one of the oldest platforms in the field. Similar to SaleHoo, Worldwide Brands helps users search and research on wholesalers and distributors from all over the world. The platform is proud to offer more than16 million certified products.

Advantage:

• Wide range of options: Thanks to years of experience in the industry, Worldwide Brands has built an impressive portfolio of suppliers and products, offering a wide range of options for users.
• Certified products: The products on the platform are all tested and certified, which helps to ensure quality and reputation.

Shortcoming:

• Tax I.D. requirements: Vendors on the platform require users to have a tax identification number before proceeding with cooperation. This can be difficult for people who are just starting a business or don't have a business identification number.
• Limited customer service: No live chat support. The email response takes about two business days, which is inconvenient for users who need quick support.

Price:

• The starting price is 299 USD/year.

Modalyst

Modalystis dropshipping automation software for online businesses. The platform offers automation tools to simplify starting a dropshipping business, along with a large marketplace of high-quality suppliers and products.

Modalyst also has an official partnership with ModalystAliExpress. Through this partnership, e-commerce store owners (refer to our guide on what is e-commerce) have access toAliExpress Dropshipping Center, a tool that analyzes trending products, along with a suite of tools for importing and selling AliExpress products directly on their store.

The platform also offers integration with e-commerce platformsWix. Alternatively, you can also manually upload products to your store through a CSV file. Through AliExpress, Modalyst connects you directly to:

• More than 100 million dropshipping products
• More than 4,000 product categories
• Analyze the best-selling products on AliExpress
• Chrome extension to import products and sync orders with just one click

Advantage:

• Modalyst has its own carefully curated marketplace with suppliers in the US and EU, and they carefully check to ensure suppliers meet their high standards.
• All Modalyst Marketplace dropshipping suppliers must adhere to strict requirements for return, shipping, and pricing policies, all of which are pre-negotiated by Modalyst. This means that, as a seller, you don't have to negotiate individually with each supplier you work with.

Shortcoming:

• You must upgrade to the Pro plan to add premium and branded products to your store.

Price:

• There is a free plan with limited features, while paid plans start at $35/month.

Inventory Source

Inventory Sourceis a US-based dropshipping service provider, operating since 2002. Inventory Source is both an inventory management tool and a supplier portfolio, with the ability to integrate with e-commerce platforms and online marketplaces.

Their inventory management module supports price management, low inventory limits, custom categories, and product filters. Merchants can integrate their existing suppliers as well as use Inventory Source's supplier directory.

Their supplier directory includes product details, images, pricing, and current inventory quantities. It provides access to more than200 suppliersacross the US and China. Their dropshipping suppliers have large product categories, of which some have tens of thousands of products. Overall, these products belong to30 different categories, including fashion, electronics, books, outdoor goods, and pet supplies.

Advantage:

• Inventory Source automatically updates your inventory and online store with the latest data from suppliers.
• They also process orders by transferring order information to suppliers and syncing shipping information to customers automatically.

Shortcoming:

• The Starter Plan allows you to connect to only one provider. If you want to pick up from multiple suppliers, you'll need to pay an additional monthly fee.

Price:

• Inventory Automation: Starts at $99/month.
• Full Automation: Starts at $150/month.

DSM Tool

DSM Toolis an automation solution designed to optimize your dropshipping business on eBay. This tool allows you to add products to your eBay store from a variety of suppliers, including Walmart, Sears, AliExpress, and Amazon (US, UK, France, Germany, and Canada).

Advantage:

• DSM Tool allows users to upload more than 50 products for free, while paid plans support up to 150,000 products.
• In addition to AliExpress, DSM Tool also connects you to product categories from other major platforms like Walmart and Amazon, making it easy to choose suppliers and start selling right away.

Shortcoming:

• DSM Tool only has 50 dropshipping suppliers in its database, which is a relatively limited number compared to its competitors.

Price:

• A free plan is available.
• Paid plans range from $24.97/month to $499.97/month.

FAQs about Dropshipping

What is Dropshipping?

Dropshipping is a business model where you sell products to customers without storing goods. When an order is placed, you pass the information to the supplier, and they will process the order, pack it, and deliver the product directly to the customer. You act as an intermediary between the supplier and the customer.

How Much Capital Do I Need to Start Dropshipping?

Starting with dropshipping requires very low capital, as you don't need to buy inventory. Initial costs typically include:

• Fees for building and maintaining a website (or account on the e-commerce floor).
• Marketing and advertising costs to attract customers.
• Fees for using the dropshipping platform (if any).
• You can start with a few million VND, but the amount of capital will increase depending on the advertising strategy and the size of the business.

How to Find a Reputable Dropshipping Supplier?

To find a reliable supplier:

• Use well-known dropshipping platforms like AliExpress, SaleHoo, Spocket, Inventory Source.
• Look for suppliers with good reviews, clear policies on returns, exchanges, and transit times.
• Check product quality by pre-ordering before selling to customers.

What products to choose to sell when starting dropshipping?

When you get started, you should choose the following products:

• There is a hot trend or high demand.
• Moderate value for easy access to customers.
• There is little competition or unique, unpopular products in the market.
• Some popular categories: electronic accessories, fashion, household appliances, personal care products, children's toys.

Is there any risk in dropshipping?

While dropshipping has many advantages, there are still some risks:

• Slow delivery time: Especially if the supplier is overseas, the delivery time may be extended.
• Uneven product quality: If you don't check first, you may encounter bad feedback from customers.
• Supplier Dependent: Issues such as out-of-stock, slow delivery, or the wrong product all affect your reputation.
• Low Profits: Since you don't buy in bulk, the cost is usually higher, resulting in low profit margins.